City staff walked commissioners through their quarterly budget review during their April 16 meeting.

Kirsten Wavra, deputy finance director, told commissioners that the city currently has a $4 million shortfall, which is normal since the city receives its second half of property tax payments in June.

She said that spring deficit highlights the importance of the fund balance to cover those predictable dips, as well as any unexpected expenses throughout the budget year. The city’s policy is a 22 percent fund balance in the general fund.

The fund balance also helps when the city doesn’t receive anticipated tax revenue due to protests, like a current major protest from Calumet Montana Refining.

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As of April, Wavra said the city hadn’t received $616,017 of protested taxes and that number is expected to increase for the second half of the tax payments.

The sale of the Centene building meant $1 million of reimbursements for the city. Of that, $800,000 went into the general fund, with the rest going into the water, sewer, storm drain and street funds.

To date, the city has received $201,732 received in marijuana taxes this budget year. Staff estimated about $220,000 for the year.

The city has also received $93,007 in national opioid settlement revenue, but those funds are restricted for for things such as treatment and can’t be used for law enforcement, Wavra told commissioners.

She said that city finance staff are anticipating another deficit going into the fiscal year 2025 budget process. That budget year begins July 1 and Wavra said staff are beginning that budget development process now.

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Tax revenues have increased over the last few years, even with protests, due to the city taking the inflationary factor and permissive medical levy increases, and some increased in the intergovernmental funds from the state, but fines and forfeitures are trending down and expenses are increasing at a faster pace.

Mark Dunn, who was elected as the city’s new second judge in the fall, said state law had changed so courts couldn’t use some fines and that prosecutors were instead asking for more jail time.

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Wavra said so far, expenses were tracking as estimated by staff for the most part.

Within the commission budget, the city had budgeted for two elections this budget year, but the city didn’t have to have a primary, so that cost wasn’t incurred, but the city has yet to receive an invoice from the Cascade County elections office for the November 2023 municipal election, Wavra said.

Commissioner Rick Tryon asked if staff new how much of the newly taxable property was Calumet and Montana Renewables.

Last summer, the DOR estimated that the city had $1,510,213 in newly taxable properties, which is significantly higher than the finance department’s projection of $400,000. That projection was based on a 22-year average of newly taxable property.

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Wavra said she can’t give an exact percentage since the Montane Department of Revenue doesn’t provide that breakdown to the city, but based on the value of current tax protests, she’d say that the true newly taxable revenue is staying close to the $400,000 average since the newly taxable amount is about the same as the amount of protested taxes from Calumet.

Wavra said there were fewer transfers out of the general fund in this year’s budget since the city cut general fund subsidies and the library didn’t take their annual subsidy of $350,000 since the levy passed last summer.

Melissa Kinzler, city finance director, said that there were eight funds needing attention.

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Of those, the golf fund is improving, but still has a deficit.

Kinzler said the commission approved increased golf rates and their looking at purchasing new golf carts, as well as potentially extending the contract with CourseCo, the company that manages the city’s two municipal golf courses.

The city pays CourseCo a monthly management fee and the city retains risk in that if the courses don’t generate enough revenue, it still has to pay that fee.

City Manager Greg Doyon said during his recent meeting with CourseCo he asked whether the city should maintain both golf courses. Doyon said CourseCo argued that the city should keep both.

He said he’s also exploring whether the company would entertain a lease versus management agreement.

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The golf fund previously owed the general fund $1 million, but that’s been brought down to $679,331 since CourseCo took over management of the course since the company pays excess revenues back to the city.

Doyon said that the city needs to resolve the golf fund’s debt to the general fund.

The recreation fund, which is for the Community Recreation Center, not the new aquatic center, has a deficit of $151,000.

Doyon said there will be more discussions about what the do with this fund in the future, if the city sells the rec center or makes other changes.

Doyon said the city is having the current Rec Center commercially appraised.

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Since the city announced plans for the new aquatic center in Lions Park several years ago, Doyon has said publicly many times that he would likely recommend closure of the existing Rec Center downtown.

He said that he had hoped to maintain the building as a city property to be leased out, but in looking at the budget for the new aquatic center, Doyon said it will likely be brought to commissioners to put the building on the market and use those funds to resolve debt in the recreation fund.

The Civic Center events fund is also losing money and Kinzler said that if current operation trends continue, the city will have to use general funds again to offset those loses.

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Doyon said earlier this year that the city has struggled with the events fund for years and that the city has less capacity to promote their events and facilities than other venues.

In the current budget, the city cut general fund support to the events fund, leaving it to rely on fees for services to cover expenses.

Last year, the general fund, which is tax revenue, subsidized the events fund with $265,913. The previous year, the general fund subsidized events with $786,019 from the general fund, which included some COVID relief funds to replenish the lost revenue from canceled events during the pandemic.

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City finance staff told The Electric in January that they’re anticipating the fund can operate this year without the subsidy.

City parking revenues are substantially higher than during the pandemic, Kinzler said, but the parking program has a lot of deferred maintenance and those costs would wipe out the funds cash balance.

Doyon said that if something catastrophic were to happen in a parking garage, the city wouldn’t have the money to fix it and then have problems with parking lease agreements.

If there were easy solutions to parking, Doyon said they would have done it easier, but at some point, the city will have to make an investment to repair the garages.

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Finance staff are also watching the health and benefits fund. The city is in its third year of it’s own self-funded plan and the goal is to have six months of revenue on hand, Kinzler said.

That’s been a challenge lately with some major claims and the city is looking at a 12 percent insurance cost increase in the next budget.

Kinzler reviewed the city’s existing five tax increment financing districts and said there’s been some discussion of closing the Central AgriTech Park, which is where Malteurop and ADF are located.

To close the park, the city would have to pay off about $1.2 million in debt, but there’s about $1.4 million in the district’s fund so the remainder could be distributed back to the taxing jurisdictions.

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Of that, about 28 percent. or $168,000 would come back to the city annually if the district was closed, she said.

The district is currently set to run through 2040 and Kinzler said she didn’t think the city could close that district in time for the next fiscal year budget.

Asked what would be a negative of closing the industrial district, Kinzler said that the city wouldn’t have the increment financing for public improvements within the district but she didn’t think there were any such projects on the horizon.

Commissioner Joe McKenney asked to look at the East Industrial Park, which is known as the AgriTech Park that’s the Great Falls Development Alliance is developing near Malmstrom Air Force Base.

Kinzler said that about $6 million of debt has been issued through that agreement.

Doyon, city manager, said that more discussion was needed to consider closing the industrial TIF district on the northern edge of the city since it was designed to accommodate heavy industrial projects, which are needed to help grow the tax base.

He said there was an active effort to bring companies to that industrial park, but those efforts slowed during COVID.

Commissioners would need to weigh the need for industrial development against resolving some debt and bringing some additional revenue into the general fund.